Negotiating the Poverty Target

The release of the initial proposal

The Commission’s initial proposal to reduce the number of individuals living in poverty by 25% caused something of a storm. While the Council was able to agree on the fundamentals of Europe 2020 in March 2010, the negotiations surrounding

the poverty target (and education) resulted in a stalemate during the meeting and the launch of the strategy was postponed until after the June Council meeting (Council of the European, 2010: 2). The proposal had represented an internal political compromise within the Commission - initially, with the support of the newly appointed President of the European Council, Herman Van Rompuy, DG EMPL Commissioner László Andor had proposed a reduction in poverty of one third. This objective was deemed realistic by many, including the social NGOs, who usually advocate a 50 per cent reduction (EurActiv, 2010b). However, internal discussions between DG EMPL and the Secretariat-General reduced the target to 25 per cent for fear that such an ambitious proposal would not gain the broad support of the Member States.⁸ Clearly the political context of negotiations within the ESD during the first Barosso Commission were influential in this decision. The Commission proposed that the calculation of poverty should be done via one single measure of

‘at-risk-of-poverty’ (i.e. people living on less than 60% of national median equivalised income). The poverty and social exclusion target was to form part of five quantified targets within Europe 2020 along with employment; spending on research and innovation; climate change and energy use; early school leaving and participation in tertiary education. In a second tier, the programme consists of 10 integrated guidelines containing both the Broad Economic Policy Guidelines (BEPG) and those relating to Europe 2020. One of the latter guidelines, located under the heading of employment, relates to the poverty and social exclusion domain and commits the EU to “promoting social inclusion and combating poverty, clearly supporting income security for vulnerable groups, social economy, social innovation, gender equality, and the poverty headline target”.⁹ At a third level, there were to be the Flagship

Initiatives which, jointly undertaken by EU and national actors and steered by the European Commission, centre on thematic priorities intended to support the achievement of the five EU-level targets. One of the seven Flagship Initiatives was to be devoted to poverty and social exclusion known as ‘the European Platform against Poverty and Social Exclusion’.¹⁰ This would have the task of raising awareness of people experiencing poverty and social exclusion and transforming and strengthening ‘the Open Method of Coordination on social exclusion and social protection into a platform for cooperation, peer review and exchange of good practice,’ (Commission, 2010a: 19).

Despite the initial target being internally watered down, the Commission’s proposal was ambitious: the target not only represented the first EU quantitative target to reduce poverty and social exclusion, but Member States were also expected to converge upon one single measurement of poverty – that of at-risk-of-poverty, rather than the very diverse official measurements of poverty that were in place at the national level. This classic relative poverty measurement (being below a 60 % cut-off of median income) is based on how one’s income compares to the societal average. As an approach to social policy it calls for either income redistribution (if poverty is seen in terms of falling below a relative income threshold) or the guaranteeing of a basic or minimum income threshold below which no one should fall (if an absolute approach is taken). To give some idea of the scale of the ambition of this initial proposal, over the course of the eight years of relative growth in Europe (2000-2008), the prevalence of relative income poverty in the EU as a whole remained more or less unchanged (Cantillon, 2011).

Opposition to the Commission’s proposal soon gathered momentum. Sweden, the UK, Ireland and Malta, along with the CEE states of the Baltics, Bulgaria, the Czech Republic, Poland, Romania and Slovakia, all opposed the target and situated themselves at the centre of the liberal coalition. Actors such as BusinessEurope were also opposed to the target, but given that the proposed target would not directly affect EU businesses, it was less involved in the negotiation of the poverty target and focused its effects on other policy negotiations in Europe 2020, such as those to promote growth and innovation. The liberal coalition aimed to remove the target from Europe 2020, or at the very minimum to gain a political compromise in which the target was significantly weakened. The coalition argued that Europe 2020 should prioritise policies concerning economic growth and jobs, particularly given the impact of the Eurozone crisis on the European economy.

However, opposition to the target per se within the liberal coalition was for different reasons. Sweden, with its relatively low level of poverty, took a strong position on job creation as the primary tool for tackling social exclusion and favoured reducing poverty via an increase in employment.¹¹ This reflects the Swedish political economy which provides comparatively high levels of public services based on high rates of female employment which tend to crowd-out low paid service sector jobs (and poverty traps) (Esping-Andersen, 1990; Steinmo, 2003). Evidence from neoliberal political economies (such as the UK), with a large low paid and low skilled service sector, demonstrates that under different political economy conditions, employment participation does not automatically lead to a reduction in poverty (Hills, 2004;

Kenworthy, 2008). Rather, employment in the low-paid service sector can encounter poverty traps. In the latter situation individuals can find themselves in a situation whereby following a period in which state welfare has been received, a return to work and thereby an increase in income results in a loss of benefits so that the individual is no better off. Alternatively, individuals who simultaneously claim benefits and work (usually through an income top-up scheme) can find that an increase in the hours worked results in no overall change to their net income.

The other opposing Member States in the liberal coalition marshalled a different set of arguments and their positions were determined more by ideological, rather than practical purposes. A problem pointed out by these Member States focused on poverty measurement, and a reliance on relative income - if real income in the economy increases, but income distribution remains constant, the rate of relative poverty also remains constant. Within the majority of the CEE states, the argument against benefit dependency had gained ground during the transition process (King, 2007; King and Sznajder, 2006). Furthermore, the CEE states were mindful of the financial costs to them of measures agreed at EU level, and pointed to the instability of the Mediterranean countries and the Eurozone crisis as an example of excessive government spending and its consequences.¹² While welfare spending as a percentage of GDP is much lower in CEE compared to EU-15, the Eurozone crisis was providing further justification that welfare spending should only be increased, if necessary, in the region once levels of economic growth ‘had caught up with the west’. Following the release of the Commission’s proposal for Europe 2020, Poland,

via its Permanent Representation in Brussels, coordinated opposition to the poverty target with its counterparts in Permanent Representations of the liberal coalition.

Despite the different reasons for their opposition to the proposal, the unholy alliance between Sweden (a social democratic welfare that is often perceived to be a supporter of progress within EU employment and social policy, but has also proved itself on occasion to be a staunch opponent – see page ??) and the other more ideologically liberal minded states within the coalition held fast during the negotiations. The liberal coalition argued that the Commission had failed to consult the Member States on the proposed target and that the use of one signal indicator to measure poverty demonstrated that the Commission had given little thought to the issue. In the interviews carried out for this monograph the view was expressed that it had been inserted during last minute preparations to appease ‘social lovers’.¹³ Since 2000 the EU has developed quite a complex and diverse set of indicators associated with the Open Method of Coordination in Social Protection and Social Inclusion, thereby recognising Member State social policy diversity and allowing Member States some flexibility in conceiving of the issues involved (Daly, 2010). The question then was why depart from this practice and adopt a unidimensional approach? Secondly, the liberal coalition also shared concerns about the poverty target as part of the governance mechanism of Europe 2020. In its draft proposal, the Commission argued that Europe 2020 required ‘a strong governance framework that harnesses the instruments at its disposal to ensure timely and effective implementation’ (Commission, 2010a: 27). The Commission was to be responsible for country surveillance and could issue Country Specific Recommendations for the

Broad Economic Policy Guidelines (under Article 121.2) and employment guidelines (under Article 145-150). In its draft proposal the Commission had incorporated the poverty target into the employment pillar which under Articles 145-150 (TFEU), gives the EU its competence within the Employment Strategy - including the requirement for Member States to submit annual progress reports and upon review of such reports by the Commission, the issuing of Country Specific Recommendations (CSRs) in areas where more progress could be made. Articles 151-153 (TFEU) concern the EU’s competence in social policy, but do not prescribe an OMC–type governance procedure similar to that in Employment. While the Commission had made no reference in its draft proposal to the issuing of (CSRs) for the poverty target, Member States in the liberal coalition shared a concern about the possibility of such

‘top-down imposition’ on the part of the Commission.¹⁴ In other words, the poverty target and its incorporation into the mainstream governance of Europe 2020 was perceived as an attempt to strengthen the EU’s mandate within social policy via the back door.¹⁵

In support of the proposal the regulatory coalition consisted of the governments of Austria, Belgium, Cyprus, France, Italy, Portugal and Spain. Their position papers for Europe 2020 all argued that the achievement of the Internal Market should not be considered as an end in itself. Rather, progress in economic growth and jobs should go hand-in-hand with the preservation and strengthening of social Europe. A further source of support for the coalition came from the new President of the European Council, Herman Van Rompuy, who had been given the specific task of formulating Europe 2020 and who was himself committed to a strong social dimension. He

argued that governments should adhere to a limited number of guidelines (five), of which a specific target should be set to reduce poverty.¹⁶ These seven Member States and Van Rompuy, along with the social NGOs and the Socialists in the Parliament, had lobbied the Commission for the inclusion of a social component to Europe 2020 and Spain used its strategic position, as President of the Council of the EU in the first half of 2010, to put Social Europe on the Agenda, both with respect to Europe 2020 and the broader process of European integration (Spanish Presidency, 2010).¹⁷ The Spanish Presidency also coincided with the launch of the EU’s Year for Combating Poverty and Social Exclusion, launched on 20 January 2010, and this further helped to maintain the profile of social Europe. Within the regulatory coalition the Year for combating Poverty and Social Inclusion provided a further inventive to produce policy commitment in the field, as it would symbolise that substantive progress could be made during the 12-month programme of events.¹⁸ A further strategy of the regulatory coalition was to highlight the progress and importance of the Social Protection Committee over the last decade and thereby the importance of balancing economic growth with progress in Social Europe.

The remaining Member States (Denmark, Finland, Hungary, Slovenia, Germany, Luxembourg, the Netherlands) declared that they were flexible on the proposed target and did not attach themselves to either coalition. At the European Council meeting on 26 March 2010 the division between the coalitions resulted in no agreement being reached on the poverty target. In fact, in light of the time restrictions on reaching an agreement on Europe 2020 (i.e. summer 2010), the polarised division within the Council gave rise to speculation that the target may be

dropped altogether. In light of the promise made by to the European Parliament by President Barosso, the Commission became reluctant to withdraw the proposed target and expressed its commitment to the objective. Furthermore, the regulatory coalition (in particular the European Anti Poverty Network) lobbied both the Commission and the European Council / Council of Ministers to maintain the target and without such broader support within the EU’s political space, the poverty target may have disappeared from Europe 2020 altogether. The result was that the Member States agreed a willingness to tackle poverty and social exclusion as part of the Europe 2020 programme. However, the existence of a quantified target, its definition, and constituent elements, were to be opened-up for negotiation.

Continued Liberal Coalition objections to the Target

The European Commission and the Spanish Presidency had decided that, given the time constraints for negotiation, the best solution to reach an agreement was for individual bilateral negotiations between the Secretariat General and via their Permanent Representations in Brussels, the governments of the Member States.

Members of the liberal coalition decided that a coordinated response during the bilateral negotiations would have the best possible impact on outcomes.¹⁹ Representatives from the permanent representations of the Baltic States, the Czech Republic, the Netherlands, Slovakia, Sweden, Poland and the UK established regular contact, such as phone calls and emails, to defend their position. Coordination between the group was also organised through the existing communication channels of the Social Protection Committee, which includes representatives (normally civil

servants) from the national administrations. However, in light of the publicity and general support that the creation of poverty target had already attracted from the regulatory coalition (particularly in the European Parliament), the general consensus within the liberal coalition was that the removal of target would be near impossible to achieve; the best possible outcome for the liberal coalition was to ensure that any agreement on the target remained flexible (particularly with respect to defining poverty and social exclusion) for the Member States with only voluntary obligations.²⁰

What particular contribution were the CEE Member States making to the negotiations? It should first be noted that the majority were initially opposed to the poverty target – the Baltic States, Bulgaria, the Czech Republic, Poland, Romania and Slovakia. Only Hungary and Slovenia remained outside of the liberal coalition, but importantly they did not formally join the regulatory coalition. When representatives from the two latter Member States were questioned on this position, they commented that they did not have a problem with an EU target that was ‘flexible and non-obligatory’.²¹ Second, the 8 CEE Member States that were opposed to the target, all were vocal about their opposition. Czech Minister for European Affairs, Juraj Chmiel, said of Europe 2020: ‘the biggest problem for us was the poverty target because is did not have any other explanatory value and it was not clear where the goal came from’. While Richard Kadlčák, from the government’s European Policies Coordination Department, said: ‘Poverty will be automatically reduced by fulfilling other objectives of the strategy’ (EurActiv, 2010b). High-level representatives from other Central and Eastern European Member States, including Romanian President

Traian Basescu and Slovak Prime Minister Robert Fico, publically expressed their opposition to the target. Such a position, as expressed by Eastern Member States in the liberal coalition is in accordance with the liberal argument that improvements in the social condition of individuals can be achieved via the spillover effects of economic growth. Finally, Poland used its position, as the largest new Member State, to coordinate opposition to the target between the old and new Member States within the liberal coalition (EurActiv, 2010b).²²

The first tactic of the liberal coalition was to raise the issue of the EU’s legal competence in the area of inclusion and social protection, and to question the consequences of including a quantified target to reduce poverty within the governance area of employment. During their individual bilateral meetings with the Commission and the Spanish Presidency, governments of the liberal coalition asked for clarification on this issue and repeated the argument that the EU had no legal mandate for such a proposal and that the target was a ‘competence creep’ on behalf of the Commission.²³ A second tactic was to push for a greater flexibility in defining poverty, rather than the use of one definition - ‘at-risk-of-poverty’ - stipulated within the initial proposal. In pushing for greater flexibility, the liberal coalition argued for the inclusion of a ‘jobless-household’ definition and that of ‘severe material deprivation’. Defining poverty in terms of ‘jobless-households’ is relatively new and emerged first in the neo-liberal countries in the 1990s (especially Australia and New Zealand). The problematisation of jobless households is driven by the possibility that joblessness may be a characteristic of particular types of families, the values they hold, the behaviours that they engage in (especially as parents) and the apparent

corrosive effects of worklessness on people and their families, children especially. In this sense it is a cultural term, a comment on micro (individual) behaviour magnified to a more meso (household and family) level. It links closely to the activation thrust of contemporary social policy and gives some security to those who fear that a focus on income poverty alone would lead automatically to redistributive policies. But the concept also has other resonances and roots and is larger than unemployment or worklessness. As a comment on labour market developments, it picks up on the possibility of growing polarisation of labour markets, especially as regards having a job at all and the quality of that job (Gregg and Wadsworth, 1998; Kenworthy, 2008).

It also prioritises economic discourses of social exclusion. ‘Jobless households’

therefore cover a range of potential ‘problems’ and appeals, if not across the entire political spectrum, then at least to more than one constituency within the EU.

Measuring poverty as jobless households had a particular appeal for the Netherlands, Sweden and the UK, as well as the CEE states. As numerous interviewees from CEE commented: ‘low skilled work is better than nothing’ and

‘work gets you out of poverty’.

Measuring poverty with respect to ‘material deprivation’ also had a particular appeal to the CEE Members of the liberal coalition. Material deprivation measures poverty as being without at least four items out of a nine-item list of ‘deprivations’ and is meant to pick up on lifestyle and access to the customary standard and style of living.²⁴ The measurement is a relatively new in the social policy constellation at the national and EU levels and it took 9 years of debate and contestation before Member States could agree on a set of deprivation indicators under the Lisbon